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Author: Rajeev Mantri
Publication: Threadreaderapp.co
Date: September 2, 2022
URL: https://threadreaderapp.com/thread/1565648325432332288.html
Given unprecedented inflation in advanced economies, one has to question their policy choices through the pandemic. While the shock to energy and food prices from the European war is a proximate cause, excessive fiscal stimulus during 2020 had fragilized these countries.
For example, UK could soon see inflation north of 20%. These levels are unheard of, last seen many decades ago. This will deal a severe blow to real disposable incomes and household savings.
https://www.bloomberg.com/news/articles/2022-08-30/goldman-sachs-says-uk-inflation-is-at-risk-of-topping-22
What must be noted and remembered is most of the "policy experts" and economists were building pressure for India to follow the same playbook in 2020: go for a huge fiscal stimulus, even as the country went into a total lockdown. Slam brakes and accelerator simultaneously!
But the Government's strategy always was: Wait, watch and then respond
https://economictimes.indiatimes.com/news/economy/policy/wait-watch-and-then-respond-to-covid-19s-economic-impact-sanjeev-sanyal-principal-economic-adviser/articleshow/84196241.cms?from=mdr
rather than getting carried away in the moment thus taking hasty, irreversible and damaging decisions.
Let's start with freshly minted Nobel laureate, Abhijit Banerjee.
"I’m not sure the government is calling it right. Is it possible to spend an extra 2% of GDP on this right now? Probably - many countries have borrowed 10 times that amount, so why not?"
Let's start with freshly minted Nobel laureate, Abhijit Banerjee.
https://www.theweek.in/news/biz-tech/2021/05/26/spend-more-nobel-laureate-abhijit-banerjees-advice-to-indian-govt.html
In a chat with Rahul Gandhi, Abhijit Banerjee "urged the Indian government to take a clue from the US, where the Trump administration has announced a stimulus package equivalent to around 10% of the country’s GDP." [May 2020]
https://qz.com/india/1851665/abhijit-banerjee-rahul-gandhi-on-indias-covid-19-stimulus/
"We really haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP." That was Abhijit Banerjee in discussion with Rahul Gandhi in May 2020
https://www.thehindu.com/news/national/put-some-money-in-the-hands-of-peopleso-that-they-have-money-when-lockdown-opens-says-abhijit-banerjee/article31507460.ece
Here is Raghuram Rajan:
"Spend what you need, spend what it takes" [April 2020] economictimes.indiatimes.com/markets/expert…
"Government's plan plan to conserve resources for a future stimulus is self-defeating" [September 2020]
https://economictimes.indiatimes.com/markets/expert-view/spend-where-you-need-to-spend-what-it-takes-raghuram-rajan/articleshow/75378713.cms
https://economictimes.indiatimes.com/news/economy/policy/view-gois-plan-to-conserve-resources-for-a-future-stimulus-is-self-defeating/articleshow/77965769.cms?from=mdr
Arvind Subramanian too was part of this loud chorus. While not nearly in the same "academic league" as Banerjee and Rajan, he too aped Rajan and said "err more on the side of prioritising the present" [May 2020] and spend 5% of GDP
https://indianexpress.com/article/india/arvind-subramanian-e-adda-covid-response-driven-need-affordability-6390952/
https://www.livemint.com/news/india/chorus-grows-for-10-trillion-stimulus-as-lockdown-ravages-economy-11586457042338.html
The mainstream business press too would not relent. Here is the @Mint_Opinion editorial from March 29 2020, not even 2 weeks into the first lock down:
It’s time to go for broke with a ₹10 trillion plan
https://www.livemint.com/opinion/online-views/it-s-time-to-go-for-broke-with-a-10-trillion-plan-11585502977414.html
The editorial went on: "This would be a gamble, no doubt, as inflation could prove costly later. But the odds of India’s success will only lengthen as more time is lost. Whatever has to be done must be done fast."
!!!!!
Despite the intense pressure from media and intelligentsia, the Government stuck to its strategy of taking a responsible, calibrated approach. We are where we are today because of that careful, and yes, lonely, approach! Huge props to PM @narendramodi,FM @nsitharaman and team!
India's response prioritized relief to those who needed it most - we did not slam the accelerators and brakes together, but secured the needy sections of society through food provisions, cash transfers
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Rajeev Mantri @RMantri
Replying to @RMantri
India took the disciplined - and lonely - path of limited fiscal stimulus during 2020, and that paid off very well, given that countries which went for a big stimulus simultaneously with lockdowns are seeing unprecedented inflation.
https://ineteconomics.org/perspectives/blog/indian-economic-policy-stimulus-deficits-and-privatization by @gdalmiathinks
Jul 24, 2022
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,stabilized MSMEs by credit and liquidity extension
Contrary to the prevailing consensus - spend, spend, spend! - FM @nsitharaman said in September 2020: "Open to further stimulus...every time we have announced one, it has been after much deliberation and aimed at specific sections."
https://www.moneycontrol.com/news/india/open-to-further-stimulus-assessing-impact-of-the-covid-19-pandemic-on-fy21-nirmala-sitharaman-5983841.html
>@sanjeevsanyal said "government recognises the need for further stimulus at an appropriate time to perk up demand in the economy" [October 2020]
Note emphasis on calibration, timing, modulation. All of this was lost on the supposed global experts.
https://www.business-standard.com/article/economy-policy/govt-recognises-need-for-further-stimulus-at-an-appropriate-time-sanyal-120100700836_1.html
"Unconditional cash transfers wasteful, targeted credit works better", said then-CEA @SubramanianKri financialexpress.com/economy/covid-…
Scams have surfaced - on the order of $100 BILLION - in Western countries which gave free-for-all pandemic doles
https://www.financialexpress.com/economy/covid-relief-targeted-not-lavish-credit-works-better-says-cea-kv-subramanian/2283050/
https://www.wsj.com/articles/thefts-of-covid-19-relief-funds-total-at-least-100-billion-secret-service-says-11640202072
India tied its economic responses to vaccine rollout [July 2020] telegraphindia.com/business/fisca…
>@sanjeevsanyal describes it as an "Agile" approach - Agile approach, key to India’s economic response to the Covid-19 shock [February 2022]
https://www.telegraphindia.com/business/fiscal-stimulus-tied-to-vaccine-release-says-krishnamurthy-subramanian/cid/1787086
https://www.thehindubusinessline.com/economy/agile-approach-key-to-indias-economic-response-to-the-covid-19-shock/article64959823.ece
Here is another "expert" who tried to push India to adopt the inflation-stoking, scam-ridden strategy of Western countries.
India needs large fiscal stimulus, says Kaushik Basu
He served as CEA during UPA Govt - a similar era of high inflation and scams
https://www.financialexpress.com/economy/covid-19-india-needs-large-fiscal-stimulus-says-kaushik-basu/1954096/
There were voices of reason, wisdom and temperance. @APanagariya had said in April 2020: The Government "needs to resist those calls [for large stimulus] and take a more measured approach". timesofindia.indiatimes.com/india/india-sh… He has proved to be spot on!
"Many in the west believe that spending will save the economy in the wake of Covid-19. @APanagariya argues debt must be kept under control if economies are to survive the crisis, and that India is showing early signs of getting it right." [July 2020]
https://iai.tv/articles/spending-wont-save-us-india-economy-auid-1587
While the intellectual-media complex doesn't impose consequences upon history sheeter "experts", we should remember who said what, and be careful of future prognostications and suggestions made by individuals who would be quickly discredited had they been in any other field.
It is also notable that some of these worthies are now openly participating at political forums.
To sum it up, credit is due to the Government of India for its responsible and smart handling of the economic fallout of the Covid pandemic 👏
India is in good hands! #LongIndia
But the commentariat wants to deny India's leadership the great credit due to it. The too-clever-by-half Ruchir Sharma photoshopped out India from an FT piece
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Rajeev Mantri @RMantri
“From the start of the pandemic, many emerging nations watched the US and other large developed countries “go big” on economic stimulus, and wished they could afford to follow. It turns out they were lucky if they couldn’t and wise if they chose not to”
https://twitter.com/RMantri/status/1452716640613789696/photo/1
Oct 26, 2021
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even has he noted "pandemic stimulus has backfired in emerging nations." |
